Lii Hen’s Chua Lee Seng surfaces as substantial shareholder in Tafi

TheEdge Wed, Jul 01, 2020 03:00pm - 3 years View Original


LAST week, Chua Lee Seng — the 70-year-old executive director and 42.89% shareholder of Muar-based furniture manufacturer Lii Hen Industries Bhd — surfaced as a substantial shareholder in another furniture outfit, Tafi Industries Bhd. Tafi is also based in Muar, Johor.

Lee Seng acquired 610,000 shares in Tafi, nudging his holding up to 4.33 million shares to control 5.59% of the company. He had surfaced as one of the top 30 shareholders in 2015 and has held a small stake with other members of his family since 2016. A check on Tafi’s annual report shows that as at May 20 this year, Lee Seng had 3.68 million shares or a 4.76% stake. According to the company’s 2018 annual report, as at March 29 last year, Lee Seng had 2.29 million shares or 2.5% equity interest.

There are other shareholders in Tafi with links to Lee Seng and Lii Hen. Chua Gek Tiow, who has 1.41 million shares or a 1.82% stake, and Chua Yong Chai, who owns 730,000 shares or 0.94% equity interest, are the daughter and son of Lee Seng respectively.

All three are also listed in Tafi’s 2018, 2017 and 2016 annual reports as holding a small number of shares.

What the Chua family’s plans are is not clear, but Tafi does not seem like it is in good shape.

“It could be the Muar connection,” says one fund manager, who speculates that as both companies are from Muar, they could be friendly parties.

Tafi has suffered five consecutive financial years of losses. For its financial year ended December 2019, it registered a net loss of RM3.81 million on revenue of RM27.2 million. As at end-December last year, short-term and fixed deposits, cash and bank balances stood at RM6.51 million. On the other side of the balance sheet, the company had a low level of borrowings but owed its directors RM2.87 million, and had accumulated losses of RM1.04 million. It also had negative cash flow of RM311,000.

Tafi’s largest shareholder with a 21.48% stake, or 16.58 million shares, is the Estate of Saw Han Lim, followed by Tan Kim Hui with 9.72%, privately held Arcadia Ventures with 7.74%, and Simfoni Semangat with 5.49%.

The late Han Lim’s son, 61-year-old Datuk Saw Eng Guan, is group managing director of Tafi.

The counter was last traded on June 15, closing at 18.5 sen and giving the company a market capitalisation of less than RM15 million. Its net asset value per share as at end-2019 was 53 sen. The counter has been trading at multi-year lows.

Tafi’s assets, mainly its warehouses and factories, are located in Bukit Pasir, Muar, and have a net book value of more than RM13 million. It also has more than six acres of land in Jasin, Melaka, which has a net book value of RM2.21 million, and another 0.7 acres in Tanjung Agas, Muar, which is worth some RM600,000.

While it may not be performing well financially, Tafi has a presence in the US, Africa, the Middle East, the UK, Australia, Europe and New Zealand.

Interestingly, in its FY2019 annual report, Tafi says, “Currently, the group relies on several customers for the export sale of its home furniture, which amounted to 80% of the group’s revenue and there is no assurance that these customers will continue to place orders for the group’s furniture indefinitely. As such, the group will continue its efforts to take the necessary steps to grow its customer base by initiating strategic partnerships to increase its market reach.”

Lii Hen, meanwhile, is controlled by Chua and family with a 42.89% stake. Lii Hen’s managing director is 52-year-old Chua Yong Haup, who is the nephew of Lee Seng.

Compared with Tafi, Lii Hen’s financials look good. For its financial year ended December 2019, it registered a net profit of RM78.36 million on revenue of RM836.62 million.

As at end-December 2019, the company had fixed deposits of RM83.06 million and cash and bank balances of RM64.71 million. Short-term borrowings stood at RM17.13 million and long-term debt commitments amounted to RM994,000.

As at end-2019, Lii Hen had reserves of RM284.96 million while cash flow from operations was RM149.13 million.

Since March this year, the stock has gained close to 50%, closing at RM2.36 last Thursday, giving the company a market capitalisation of about RM425 million.

Lii Hen’s factories and other assets are largely in Muar as well but in the Sungai Terap area, which is not far from Tafi’s factories in Bukit Pasir.

Similar to Tafi, Lii Hen’s export markets are the US and Canada, which accounted for 77% of its total revenue in 2019, as well as the Middle East, Asia, Africa, Latin America, Europe and Australia, among others.

 

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